In a legal memorandum, the Service has determined a testamentary trust that was named as the beneficiary of a decedent's IRA cannot claim an income tax deduction under section 642(c) for payments it made to charities. The trust was to pay a percentage of the trust property to the decedent's children and to several charities; however, it failed to meet the regulatory definition of a designated beneficiary trust under section 401(a)(9). Although the trust was subsequently modified by court order to comply, the Service determined the purpose of the modification was to permit the trust to deduct payments made to charities. Citing a revenue ruling and court decision, the Service concluded that since the modification was not made as the result of a conflict, the payments to the charities are not considered to be made under the governing instrument and, therefore, are not deductible.  MORE »

In emailed Chief Counsel Advice pursuant to a pending case, the IRS reviews the contemporaneous written acknowledgment requirements for gifts of conservation easements under section 170(f)(8)(A).  MORE »

The IRS has ruled privately that a transfer by taxpayer to a charity in exchange for a charitable gift annuity will be deductible for income and gift tax deduction purposes and will not be barred by § 170(f)(10)(A) (relating to split-dollar life insurance, annuity and endowment contracts). In this case, the charity will use a portion of the amount transferred by the donor (in the form of a single premium) to purchase a commercial annuity contract to cover its obligations under the gift annuity agreement. The commercial contract will include an option that returns a portion of the premium paid by the charity to it in the event the annuitant dies prior to the aggregate payments made by the insurer equaling or exceeding the premium paid.

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For purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2008-53 indicates the applicable federal rate under section 7520 for December 2008 is 3.4%; down 0.2% from the November rate of 3.6% and down 0.4% from the October rate of 3.8%.  MORE »

The Internal Revenue Service has issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.  MORE »

The Service has denied a proposed supporting organization to a community foundation's application for tax-exempt status based on the fact that neither the donor nor the contribution assets were identified. In the absence of a donor or assets, the Service could not determine the SO would be operated for exclusively exempt purposes and that the disqualified person would not inure or privately benefit through their relationship with the organization. "In effect," the Service said, "you seem to be trying to create a 'prototype' application package in which you can receive favorable determinations for the entities prior to identifying or even finding the donor and determining the non-marketable assets.   MORE »

The Service has ruled privately that an early termination of a charitable remainder unitrust and distribution of trust assets between income and remainder beneficiaries will not result in a prohibited act of self-dealing even though the charitable remainderman is a supporting organization at the time of the transaction and even though the grantor/income recipients are directors of the SO. The ruling is based on the fact a supporting organization is considered a public charity. The Service stated the ruling would not be valid if the remainderman was a private foundation at the time of the transaction.  MORE »

In a complicated fact pattern, the Service has ruled privately that a private nonoperating foundation that receives stock of an S corporation/holding company via an irrevocable trust established by a shareholder/grantor and to which the excess business holdings rules apply will have five years to dispose of the stock that begins on the date the stock is actually transferred from the trust to the foundation.  MORE »

Writing on behalf of the American Council on Gift Annuities and National Committee on Planned Giving, Conrad Teitell of Cummings & Lockwood has requested that Treasury amplify proposed regulations on the substantiation and reporting requirements for cash and noncash charitable contribution deductions by giving guidance and examples for split-interest gifts of income and remainder interests and gifts of life insurance.  MORE »

Writing on behalf of Deloitte Tax LLP, Laura Peebles has suggested that proposed regulations that would require attaching a complete appraisal with Form 8283 in any year in which an income tax charitable contribution deduction is carried over be removed and that including a copy of prior years' Forms 8283 would be sufficient.  MORE »

In response to requests for public comments regarding proposed regulations implementing the redesigned Form 990, Morristown, N.J. attorney Edward Hein has suggested the form be modified to include language that a grantor or contributor is not considered responsible for the loss of public charity status based solely because of a grant or contribution.  MORE »

The IRS on Halloween issued Notice 2008-99 in which it announced its interest in a type of transaction involving the sale of interests in a charitable remainder trust that might result in inappropriate tax avoidance by the trust’s grantor. The notice requires any persons entering into and material advisers who make a tax statement regarding such transactions, as well as charitable remaindermen that participate to disclose the transaction to the IRS. In addition, the Service and Treasury are requesting public comments on how the transaction might be addressed in published guidance.

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The United States District Court for the District of Kansas has denied an estate tax charitable deduction for a testamentary charitable remainder trust based on the fact the trust did not conform to the requirements of section 2055 and a petition to reform the trust was not filed before the 90th day after the last date (including extensions) for filing the estate tax return.   MORE »

The IRS has announced that its next Tax Talk Web cast will focus on "preparing for the new Form 990." One CPE credit is available.  MORE »

For purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2008-50 indicates the applicable federal rate under section 7520 for November 2008 is 3.6%; down 0.2% from the October rate of 3.8% and down 0.6% from the September rate of 4.2%.  MORE »

The Senate Finance Committee has issued a release in which it summarizes the tax provisions included in the Emergency Economic Stabilization Act of 2008. Charitable components include the IRA Rollover Provision, Basis Adjustment to Stock of an S Corporation Making Charitable Contributions of Property, Enhanced Charitable Deduction for Qualified Computer Contributions, Enhanced Charitable Deduction for Food Inventory, Enhanced Charitable Deduction for Contributions of Book Inventory to Schools, Temporary Suspension of Limitations on Charitable Contributions, Increase in Standard Mileage Rate for Charitable Use of Vehicles, and Exclusion from Income of Mileage Reimbursements for Charitable Volunteers.

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Treasury has issued Notice 2008-90 in which it announces that the Internal Revenue Service (Service) and the Treasury Department are studying the computation of the deductible amount and adjustment to cost of goods sold for charitable contributions of inventory property that constitute qualified contributions as defined in § 170(e)(3)(A) of the Internal Revenue Code.  MORE »

On a 74-25 vote, the Senate has passed H.R. 1424 which combines provisions similar to the financial bailout package that failed in the House on September 29 with the provisions of H.R. 6049, a Senate-approved package that includes an AMT patch; renews tax incentives for businesses, individuals, and renewable energy; and provides disaster-related tax relief. The charitable provisions found in H.R. 6049 remain intact. The measure now moves on for consideration by the House.

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On a vote of 257 to 166, the House on Friday passed The Renewable Energy and Job Creation Tax Act of 2008 (H.R. 7060) that would extend expired tax incentives, provide AMT relief, and promote energy exploration. However, House Democrats upheld a point of order that blocked Republicans from bringing up H.R. 6049, passed by the Senate on September 23. The disagreement involves the House bill providing complete offsets, which would almost certainly guarantee a Senate Republican filibuster and threatened White House veto. House Democratic leaders may adjourn without resolving a standoff.  MORE »

On a 93-2 vote, the Senate has passed an amended version of H.R. 6049, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008. Core bill components include clean energy tax incentives, protection of millions of Americans from the alternative minimum tax (AMT), extensions of expiring family and business tax cuts, and charitable giving extenders and incentives.

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In the September 19, 2008 issue of Exempt Org Update: Tax Talk Today Webcast: Preparing for the New Form 990; Western Conference on Tax Exempt Organizations; New EO On-line Mini-Courses Now Available; Register Now for Fall Workshops for Small and Mid-Sized 501(c)(3) Organizations; Priority Guidance Plan Issued; IRS Releases Interim Report on 501(c)(3) Bonds Project; and Disaster Relief for Texas and Louisiana.  MORE »

The National Heritage Foundation has issued a press release in which it responds to a recent $9 million adverse jury award in a case involving a charitable split dollar plan and announces its plans to appeal the verdict.  MORE »

For purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2008-49 indicates the applicable federal rate under section 7520 for October 2008 is 3.8%; down 0.4% from the September and August rates of 4.2%.  MORE »

Writing on behalf of the American Council on Gift Annuities (ACGA) and the National Committee on Planned Giving (NCPG), New York attorney Conrad Teitell expresses opposition to the proposed Charitable Lead Trust regulation that requires the payments to the charitable beneficiary to consist of different classes of income determined on a pro rata basis.  MORE »